Following are two income statements for Javelin Company for the month ended December 31, 2020. Column B was prepared before any adjusting entries were recorded and column D includes the effects of adjusting entries. The company records cash receipts and disbursements related to unearned and prepaid items in balance sheet accounts. Analyze the statements and prepare the adjusting entries that must have been recorded.

Of the $12,000 increase in Revenue, 30% represents additional revenue but not billed. The other 70% was earned by performing services that the customers had paid for in advance.

Analysis Component: Identify and explain which GAAP requires that adjusting entries be recorded. By how much would revenues, expenses, and profit be overstated/understated if adjustments were not recorded at December 31, 2020, for Javelin Company?

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Javelin Company Income Statements.xIsx Insert Page Layout Formulas Home Data Review View P18 A в Javelin Company Income Statements For Month Ended December 31, 2020 After 4 Before Adjustments Adjustments Adjustments 6 Revenues: $ 48,000 85,000 $ 60,000 Service revenue Commissions revenue 85,000 Total revenu $133,000 $145,000 10 Operating expenses: Depreciation expense, computers $ 3,000 11 2$ -0 12 Depreciation expense, office furniture Salaries expense -0 3,500 13 14 15 25,000 29,900 Insurance expense -0- 2,600 Rent expense 9,000 9,000 Office supplies expense 16 -0 960 17 Advertising expense Utilities expense Total operating expenses 6,000 6,000 18 2,640 $ 57,600 $ 87,400 2,500 $ 42,500 $ 90,500 19 20 Profit